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Download Population & Policy Compact 04/2012 Number 4 November 2012 RIDING THE POPULATION WAVE Policy Options for the Ageing Baby-Boomer Generation in Europe Authors: Key messages: AXEL BÖRSCH-SUPAN • Resistance against an increase in the retirement age is often based on myths AGNIESZKA CHŁOŃ-DOMIŃCZAK that do not stand up to scientific evidence. VEGARD SKIRBEKK • The economic burden of population ageing is not a demographic destiny, but depends on the productivity of tomorrow’s workforce. • Policies should promote information campaigns, life-long learning activities, and measures to support a comprehensive work-education-life balance. www.population-europe.eu THE NETWORK OF EUROPE‘S LEADING DEMOGRAPHIC RESEARCH CENTRES EUROPE’S SHRINKING AND AGEING WORKFORCE MYTH 2: Older people should not work because they are much less efficient than younger workers. Research from manufacturing com- IN EUROPE, population ageing is universal and inevitable. Neither panies has shown that although older people tend to make small immigration nor increases in fertility rates can offset that in 2060 the mistakes more often than young people, the errors young people share of the population aged 65 and over will have risen from 17 to make are much more serious and costly. In routine jobs produc- 30 per cent. At the same time the population of those aged 80 and tivity remains high over the working life, but reaching high pro- over will become almost as numerous as the population under 15, ductivity in a new job is harder for older workers. Therefore, using increasing to 12 per cent (European Commission, 2012). As a conse- human capital wisely means keeping experienced workers in their quence, Europe’s labour force will shrink and become significantly current workplaces instead of forcing them to look for new jobs older. Population ageing, therefore, will not only exert pressure on (Börsch-Supan et al., 2008). pension and health care systems, but could represent a threat to economic prosperity. MYTH 3: Life after retirement is bliss. In reality, life satisfaction after early retirement decreases faster than after retirement at a later age (Börsch-Supan & Jürges, 2006). People who retire later also FIVE MYTHS ABOUT AGEING AND WORK retain their cognitive abilities longer. In Sweden, for example, cog- nitive performance of 60-64-year-old men and women is signifi- MANY LABOUR MARKET AND PENSION REFORMS that are essential cantly higher than in France or Italy where people tend to retire for future economic and social stability have been delayed or earlier (Rohwedder & Willis, 2010). rejected due to popular resistance. This is especially true in regard to increasing the age of retirement. However, our understanding MYTH 4: Active ageing harms the young. The argument is frequently of the retirement age is often based on a number of myths that are made that instead of working longer, older workers should give highly questionable in light of scientific evidence from the Survey of way to the young. If the young really benefit from this, countries Health, Ageing and Retirement in Europe (SHARE). with high early retirement rates should have lower youth unem- ployment rates than countries with fewer people entering early MYTH 1: Older people cannot work because they are unhealthy. retirement. In reality, the relationship seems to be the opposite Health is not the primary cause of retirement in Europe. Seniors (see Figure 2). One of the reasons for this is that early retirement is perceive themselves as relatively healthy and also perform well expensive and a serious burden to the economy. on the level of objective measures (see Figure 1). Although there 70 is a decline in health between ages 60 and 69, it is much smaller than the variation within each age group. A flexible retirement age 60 Belgium would be much more effective in dealing with these differences France Italy 50 than a fixed age: people with health problems need to retire earlier Netherlands whereas most people could easily work longer. 40 United Kingdom 90 Canada Self-perception Spain No functional limitations Germany 30 USA Sweden 20 60 Per cent of 60-64-year-old males already retired cent of 60-64-year-old Per Japan 10 0 5 10 15 Per cent Per Youth unemployment rate in per cent 30 SourceFigure 2.OECD EmploymentEarly retirement Outlook 2007 and youth unemployment rate Graphics Population Europe Source: OECD Employment Outlook 2007 0 60 61 62 63 64 65 66 67 68 69 Age MYTH 5: Population ageing is a tsunami and its consequences are our demographic destiny. Through demographic research, we see Source SHARE Figure 1. Self-perceived health status and functional limitations of the popu- Graphics Population Europe population ageing coming, we know how it will proceed, and we lation 60+ , 2004 – 2007 (self-perception: own health is perceived as good, very good or excellent; no functional limitation: no limitations can specify which policy interventions are necessary to handle its in 10 activities of daily living; countries: AT, BE, CH, DE, DK, ES, FR, GR, consequences. The focus, therefore, should shift from mitigating IT, NL, SE) Source: SHARE population ageing to compensating for its effects. 2 POPULATION&POLICY COMPACT – NUMBER 4 | NOVEMBER 2012 Number 4 November 2012 THE BURDEN OF AGEING AND COGNITIVE ABILITIES Rank OADR (ratio, countries) CADR (ratio, countries) 1 0.07 India 0.10 USA HUMAN CAPITAL AND PARTICULARLY COGNITIVE ABILITIES ARE 2 0.09 Mexico 0.12 Northern Europe (DK, UK, IE, SE) 3 0.12 China 0.14 India, Mexico CRUCIAL but often neglected factors in regard to compensating for 4 0.19 USA population ageing. The GDP per capita, among others, significantly 5 0.24 Northern Europe (DK, UK, IE, SE) 0.15 China 6 0.25 Continental Europe (AT, BE, CZ, 0.18 Continental Europe (AT, BE, CZ, depends on the productivity of the labour force. This productivity is FR, DE, NL, PL, CH) FR, DE, NL, PL, CH) 7 0.27 Southern Europe (GR, IT, ES) 0.32 Southern Europe (GR, IT, ES) also influenced by the degree of cognitive abilities within a popu- Source Authors' computations lation. Variations between countries in such cognitive abilities, like Graphics Population Europe Table 1. Different measures for the burden of ageing immediate recall, can be very large. Figure 3 shows that seniors in Source: Skirbekk et al. (2012) the U.S., northern and continental European countries have much higher immediate recall abilities than their counterparts in China, One explanation for the international variation is life-course dif- India, Mexico, and southern Europe. Given the strong relation- ferences among the older cohorts which will decrease in the long ship between cognitive abilities and individual productivity, these run. However, as cohort replacement is a slow process, the countries findings show that the USA, northern and continental European whose seniors have higher cognitive levels today are likely to con- countries have a significant advantage in comparison to the demo- tinue to have an advantage for several decades. To further counter- graphically much younger states like China, India, and Mexico. An balance the effects of chronological ageing and to secure existing advantage – and a chance – that does not become obvious when advantages it is essential to effectively prepare European societies only the chronological age is taken into account. for an older population by improving and maintaining cognitive abilities throughout the life-cycle (Skirbekk et al., 2012). 0.7 N-Europe C-Europe S-Europe USA 0.6 China THE POSSIBILITIES AND CHALLENGES OF LIFE-LONG Mexico India LEARNING 0.5 ONE OF THE MOST EFFECTIVE STRATEGIES to maintain cognition 0.4 and the employability of older workers is life-long learning pro- Immediate recall score grammes. At least two further reasons make life-long learning an 0.3 imperative of our time: (1) technological progress and globalisation lead to dynamically changing demands for skills, and (2) skills ac- 0.2 quired during formal education tend to devaluate over time (Chłoń- 50 60 70 80 85 Domińczak, 2012). Age In Europe, the level of participation in life-long learning varies FigureSource 3.Skirbekk Immediate et al. (2012) recall score Graphics Population Europe greatly with Sweden leading in the top position and Greece, Roma- Source: Skirbekk et al. (2012) nia, and Hungary having the lowest rates (see Figure 4). 100 Usually the societal burden of ageing is measured by the old-age ISCED 0 - 2: primary ISCED 3 - 4: secondary dependency ratio (OADR). It is defined as the number of people ISCED 5 - 6: higher 80 aged 65+ (that are presumed to be economically inactive) to the number of persons between the ages of 15 and 64. A cognitive ad- justed dependency ratio (CADR) also takes into account how old a 60 population is in terms of cognitive abilities. The CADR measures the ratio of the number of persons aged 50+ with limited cognitive ca- 40 pacities to the number of persons that are younger (15 to 49), plus in per cent Participation those that are 50+ but have good cognitive functioning. 20 Countries that are chronologically younger like Mexico, India and China fare poorer when the cognitive functioning of their el- 0 I I E T F O T S E Y T E K Z T V E V R L L IT S L O U S M N A N C P B DE DK U C L S E L F P B E E R H U 27 der population is taken into account, whereas the United States and E northern Europe do much better (see Table 1). These countries are FigureSource 4.Adult EducationParticipation Survey results, in formal Eurostat and (data non-formalextracted in May learning2012) by educational level, effectively “younger” in terms of productivity, having a lower share Graphics Population Europe 2006 (levels of education based on ISCED 97 classification) of seniors with poor cognitive performance.
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